As a longtime fan of The David Rubenstein Show, I’ve noticed a pattern: at some time during every episode, Rubenstein asks his guests: is Bitcoin is worth it? Of course, he poses the question in such a way that the interviewee would have to be crazy—or stupid—to possibly reply, “Yes, buy in!” Instead, we get the usual metered advice that Bitcoin is only speculation or even a Ponzi scheme that regulators will not allow to get really big. The irony is that Rubenstein himself started something that radically changed the status quo, and that in order for him to arrive at career success, large parts of the establishment first needed to recognize and accept private equity as a valid asset class. David Rubenstein broke all the rules, by bucking conventional wisdom. When he founded the Carlyle Group in 1987, private equity was seen by most as not worth it.
Success engenders such bubbles in which the successful, once ensconced at the top of the ladder, cannot recall the nature of their climb. They didn’t listen to the old guys when they were young, so why should the young listen to them now? They wonder why they can’t turn around the paradigm. What David Rubenstein was doing with private equity 30 years ago is exactly what is happening with blockchain today. As Jeff Bezos, another rule-breaker, once put it: “You have to be willing to be misunderstood in order to innovate.” Today’s legends of the asset management and hedge fund industry, like Stephen Schwartzman, may be seen as “the heroes,” but that perception evolved over time. In fact, Stephen Schwartzman started Blackstone on the heels of an embarrassing, very public flop. None of these innovators would have gotten where they are without taking a risk—and doing something “crazy.”
In my blockchain podcast, Block 52, I’ve gained a front-row seat to innovators who are exploring the vanguard of this developing industry, spurring growth and uncovering its market potential. Speaking with Tim Bruenjes from Fireblocks this January, for example, I got an insider’s view into one of last year’s biggest success stories. This digital asset management platform has grown astronomically: when Tim started working for them in 2021, they only had around 70 employees. By now, they’re on the path to grow their staff tenfold to over 700 people at the end of 2022. The volume of transactions they handle is equally impressive: with 250 billion of value transferred each month, Fireblocks is transferring more than the entire market volume of crypto (3 trillion) each year. Similarly, global digital finance provider BCB Group, which recently added German-based Sutor Bank, completed the largest blockchain Series A funding round at $60M, while by the end of 2021, the NFT platform Open Sea had raised $300 million in new venture capital, bringing their valuation to a whopping 13.3 billion USD.
In the decentralized world, the old standards of success are no longer valid metrics: we’re not playing against the same old competition. DeFi brings with it new competitive arenas, and new ways to fundraise apart from traditional VCs. This means much of our old ways of assessing a company’s value simply no longer apply. For example, when Amazon first came out, many people thought, “it’s books online—so what?” They couldn’t see that the point of Amazon was not selling books: rather its value was in how it served as a gateway to new platforms and new modes of commerce and communication, such as Audible and Prime. Anyone who likened early Amazon to Barnes & Noble without the brick-and-mortar missed the point. The larger lesson is you should never see how someone is starting out as the endpoint of the story. That isn’t the nature of potential.
That said, a great deal of hype exists around crypto and digital assets. The metaverse is a “hypey” thing. In Europe in 2019, we heard breathless accounts of how it would be the year of the security token. Yes, there were a few early starts, but then it failed miserably. DeFi didn’t truly catch on until the following year. And, beyond that hype, we must be wary of whom we see as industry leaders. Two decades ago, Google was a dark horse while AOL and Yahoo reigned supreme. Similarly in the social media sphere, Vine began with a splash until Instagram killed it with their loop. The companies that won in these scenarios—i.e., Google and Instagram (really, Facebook/Meta)—have multifunctional platforms that took risks. They evolved into multiple spaces. That ability is what sets a company apart.
So how does one cut through the “buzz” of this new field to find its real market opportunity? By building the right team to make informed decisions based on data, not hype. Companies like Immutable Insight, where I serve as CEO, can help draw that distinction, as we are fluent on both sides of the aisle. I’ve long served as a bridge builder between the emerging blockchain sector and our current financial world. I play a supervisory role for both Castell Bank’s supervisory board and the Boerse Stuttgart Exchange, while with Immutable Insight, I work to offer clients sound investment advice on blockchain projects, based on real-time analytics. So I have an appreciation for real-world regulatory issues without the cynical myopia against cutting-edge technologies.
We also have to keep in mind that we are only beginning to see what is going to be possible in our new decentralized future, as there are many projects and logistics that haven’t yet come around to tokenization. Similarly to the advent of the Internet, which changed rapidly over the course of just years, we can’t just put blockchain into one box of crypto or payment. Blockchain is across the board: it will impact every industry directly in ways we can’t yet imagine—though we can try. To begin, it’s immediately accessible to all users and is censorship resistant, which has as much application for a multiglobal corporation as for a freelance writer or musician—or any person or entity in need of a contract. It will also offer new revenue models that cut out gatekeepers, like attention tokens, where the author of a site gets rewarded for their work directly, rather than going through a middle man. From travel to art and entertainment to business and law, there is truly no limit to potential applications blockchain has to offer. The only mistake would be writing it off as a passing fad.
When I was attending Lenape High School in New Jersey as an exchange student my senior year, there was a quote hanging on the classroom wall I never forgot: “You miss 100% of the shots you don’t take.” Coming from the well-engineered, risk-averse culture of Germany, I’d never encountered such a bold sentiment: it completely blew my mind, and I’ve carried it with me ever since. Playing it safe does not translate to success: but to extend the metaphor, if you set yourself up for success by bringing together the right team, willingness to work hard and discipline and you take the shot, then you’re even more likely to win big.